Arthur Laffer is predicting the U.S. economy will collapse next year when George W. Bush tax cuts expire in 2010. His theory on the Obama tax plan is based on how the super-rich can choose when and how they collect their income to evade taxes. Laffer believes the economy is doing better this year than it really should be doing because these aristocrats are collecting more of their loot and spending more of their money before taxes rise. He says that when taxes go up, Americans who can will choose to make less money, thus reducing the government’s tax revenue anyway.
Expired Bush tax cuts 2010
Arthur Laffer became extremely famous when he influenced the Reagan administration to cut taxes. His Laffer Curve concerning taxes seems in numerous economic textbooks. Laffer said in his Wall Street Journal column that Reagan tax cuts brought the economy out of what was once the worst U.S. recession since the Depression — until the Mt. Everest recession we’re nevertheless trying to get out of now made that one look like a speed bump. He said when tax cuts went into effect on Jan. 1, 1983 the economy took off like a rocket, with average real growth that was reaching 7.5 percent in 1983 and also 5.5 percent in 1984. He doesn’t mention how Bush tax cuts in 2001 and 2003 in the face of two wars eventually ran the U.S. economy into the ground and destroyed a spending budget surplus he inherited from Bill Clinton.
The curveball for Arthur Laffer
The Laffer Curve tax cut argument misleads his readers, according to Asha Bangalore at Northern Trust. As another recession set in after the huge Reaganonomic era, Bangalore wonders why the economy posted substantial growth after tax increases were implemented by Bill Clinton in 1993. A revival of bank lending after the Reagan hangover led to quite a bit of self-sustained growth despite the tax increases. Bangalore also points out that if the Laffer Curve theory about tax cuts is valid, the U.S. economy would have done much better than the weakest period of economic expansion in history following the Bush tax cuts of 2001 and 2003.
Obama tax plan lower than Reagan’s
Arther Laffer’s predictions of economic collapse when tax cuts expire in 2010 is questioned by The Motely Fool as well. In his column Laffer says we’re all going to die when the highest federal personal income tax rate goes to 39.6 percent from 35 percent. According to The Fool, it’s worth noting the 1983 cuts Laffer remembers so fondly lowered top rates from 69.13 percent to 50 percent. . The Obama tax plan wants to revert the highest personal income tax rates to 39.6 percent, where they were in the ’90s when the economy boomed and the government collected a lot more taxes than it spent.
Arther Laffer feels your pain
Arther Laffer, who actually is the chairman of an investment consulting firm and definitely very wealthy, is making predictions of economic collapse from a very narrow point of view. Bangalore goes even further pointing out that the obstacles the economy will face in 2011 have nothing to do with tax increases. A severe credit crunch and housing market challenges are factors that can have far greater influence on the economy. Most people will keep their head up and make an effort to survive. But when Arthur Laffer’s personal income tax rate goes up by around 5 percent, the millions he won’t pocket will seem like the end of the world indeed.
Citations
Wall Street Journal
online.wsj.com/article/SB10001424052748704113504575264513748386610.html?mod=WSJ_latestheadlines
Northern Trust
northerntrust.com/pws/jsp/display2.jsp?XML=pages/nt/0601/1138283678319_6.xml&TYPE=interior&er=dgcDetail&c=primary/resource/1006/1275944180574_442.xml
Motley Fool
caps.fool.com/Blogs/ViewPost.aspx?bpid=403124&t=01003534026331805883
